Summaries of health policy coverage from major news organizations

Treasury Department To Grant Extra Time To Use Flexible Spending Account Funds

The Treasury Department on Wednesday announced a new rule that will allow companies that provide flexible spending accounts to give employees an extra two and a half months to use the funds in the accounts before forfeiting them, the Washington Postreports (Crenshaw, Washington Post, 5/19). Under the old rule, workers were required to spend the untaxed funds in their account within one year or forfeit the unspent money. The new change will allow companies to extend that deadline for employees, although it will not require them to do so. FSA funds that expire on Dec. 31, 2005, could now be extended to March 15, 2006 (Herman, Wall Street Journal, 5/19).

"The new rule will give workers with FSAs more time to pay for medical and dependent care expenses and will ease the year-end spending rush prompted by the prior rule," Treasury Secretary John Snow said (AP/Los Angeles Times, 5/19). Senate Finance Committee Chair Chuck Grassley (R-Iowa), who has pushed the Treasury Department to end the so-called "use-it-or-lose-it" rule, said the change is "great news for Americans struggling to keep up with rising health care costs."

Reaction

Randall Abbott, a spokesperson for Watson Wyatt Worldwide, said the deadline extension will be "welcome news for employees and their family members," while reaction from employers will be mixed as they work to implement changes to administrative systems and communications (Washington Post, 5/19).

Sen. Jim DeMint (R-S.C.) -- who is co-sponsoring with Sen. Ken Salazar (D-Colo.) a bill to allow workers to carry forward up to $500 from their FSAs each year -- said the new rule should encourage more people to enroll in FSAs and place additional focus on the use-it-or-lose-it rule (Washington Post, 5/19). DeMint said he will continue to push the bill in Congress, noting, "FSAs are already very helpful tools, but we can make them better" (Wall Street Journal, 5/19). According to the AP/Times, a Treasury Department spokesperson said eliminating the use-it-or-lose-it rule would require Congress to rewrite the current law (AP/Los Angeles Times, 5/19).

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